Murray case study: Sales cycle Ordering

For all new customers, a sales manager completes a credit application which is checked with a credit agency and a credit limit is entered onto the sales system by the credit controller. The sales system prompts sales managers to complete an annual credit check for existing customers, and the credit controller amends or approves existing credit limits for these customers. Approved customers are assigned with a unique customer account number. Orders are placed with the sales team. The orders are entered onto the sales system by a sales assistant. The system automatically checks that the goods are available and that the order will not take the customer over their credit limit. The system generates two order confirmations, one of which is sent to the customer by mail/email confirming the goods ordered and likely despatch date, the other is retained on file.

Goods despatch:

The warehouse receives the order electronically and goods despatch notes (GDNs) are generated automatically. A member of the warehouse team packs the goods from the GDN and a second member of the team double checks the goods packed to the GDN, signing the GDN to evidence the check.

Two copies of the GDN are sent with the goods ordered. One copy is retained by the customer and the other is signed by the customer and returned to Murray Co to confirm receipt of the goods and retained by the warehouse. A copy of the GDN is sent to the sales team who update the system, confirming despatch of the goods. A weekly report is sent automatically to the sales manager who follows up on any incomplete orders with the warehouse manager.

Invoicing:

Once despatched, a copy of the GDN is sent to the accounts team at head office and a sequentially numbered sales invoice is raised from the GDN. Periodically a computer sequence check is performed for any missing sales invoice numbers.

When the invoice is sent to the customer, the system GDN is marked as "invoiced". A system report is reviewed by the senior accountant on a fortnightly basis for any GDNs that have not been invoiced. The report is printed and signed as evidence of review.

The system generates customer invoices using the company price list, which is updated quarterly. Discounts must be requested by a sales manager and authorised by the sales director to allow the accounts team to raise an invoice.

Recording transaction:

The receivables ledger is reviewed for credit balances by the senior accountant on a monthly basis and the receivables ledger is reconciled with the receivables ledger control account on a monthly basis by the sales ledger manager and reviewed by the company accountant.

Monthly customer statements are sent to customers.

Cash receipt

Receipts are counted by the office assistant, recorded by the cashier in the cash book, and the sales ledger clerk is notified of the receipt. The sales ledger clerk agrees the amount received to the amount invoiced and marks the invoice as paid.

The credit controller reviews the aged receivables analysis on a fortnightly basis and investigates any old balances. Overdue debts are chased with a telephone call initially, followed by a copy invoice, and then a warning letter before the debt is passed to a debt collection agency.

Required:

Identify and explain FIVE DEFICIENCIES in Murray Co's sales system and provide a recommendation to address each of these deficiencies.